Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Lehman 2005 CEO Energy/Power Conference
27 slides from Kinder Morgan's conference presentation, Mar 1, 2005
Slide 1: 2005 MLP Investor Conference
2005 MLP Investor Conference March 1, 2005
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward looking statements, including these, within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Exchange Act of 1934, as amended. Forward looking statements are not guarantees of performance. They i
Slide 3: Kinder Morgan System Map
Kinder Morgan System Map 2 PACIFIC COCHIN 2 2 NORTH 2 KMIGT 2 2 PACIFIC 2 3 CALNEV 2 KMP 2 4 PACIFIC NGPL CO2 Pipelines KMCO2 CO2 Field PLANTATION Terminals KMI KM TEJAS Products Pipelines 8 Products Pipeline Terminals NGPL 2 KMTP 2 2 Transmix Facilities NGPL Storage 4 CFPL Natural Gas Pipelines Nat
Slide 4: Kinder Morgan: Three Securities
Kinder Morgan: Three Securities Kinder Morgan Energy Partners Kinder Morgan, Inc Market Equity (a) $9.5 Incentive Market Equity (b) $10.2 Debt (a) 4.7 Distribution Debt (b) 2.7 Enterprise Value $14.2 Enterprise Value $12.9 2005E EBITDA $1,581 mm 2005E EBITDA $1,142 mm 2005E Dist. CF $1,178 mm 2005E
Slide 5: 2005 Corporate Goals
2005 Corporate Goals KMP/KMR KMI Distribution Target (without acquisitions) EPS Target (without acquisitions) $3.13 per unit (9% growth) $4.22 per share (11% growth) Excess coverage of $39 million Maintain strong balance sheet Strengthen balance sheet Return cash to investors Budge
Slide 6: Consistent Track Record
Consistent Track Record Total Distributions (GP + LP) ($mm) KMP Distribution / Unit (a) $1,200 $1,139 $3.20 GP % $2.96 $978 = 20 $2.72 60% $1,000 $3.00 R LP = $827 CAG $2.50 G R $2.20 $800 CA $701 $1.90 $2.00 $600 $548 $1.45 $1.30 $1.13 $400 $333 $1.00 $0.63 $198 $200 $153 $17 $30 $0 $0.00 1996 1997
Slide 7: The Kinder Morgan Strategy
The Kinder Morgan Strategy Same Strategy Since Inception Focus on stable, fee-based assets which are core to the energy infrastructure of growing markets Increase utilization of assets while controlling costs Classic fixed cost businesses with little variable costs Improve productivity to dr
Slide 8: Management Philosophy
Management Philosophy Low Cost Asset Operator Attention to Detail Disciplined Capital Allocation Risk Management Transparency Cash is King Alignment of Incentives Business Unit Autonomy 8
Slide 9: Kinder Morgan Energy Partners
Kinder Morgan Energy Partners KMP and KMR
Slide 10: Solid Asset Base Generates Stable Fee Income
Solid Asset Base Generates Stable Fee Income Terminals Products Pipelines KMP 55% Liquids, 45% Bulk 2005 DCF (a) Refinery hub to population Geographic and product center strategy diversity 64% Pipelines 3-4 year average contract life 31% Associated Terminals (b) Terminals 16% Product 5
Slide 11: Long-Term Growth Drivers
Long-Term Growth Drivers Business Segment Growth Drivers Products Pipelines Gasoline demand tracks demographic growth Serve 8 of 10 fastest growing metropolitan areas Price escalator = PPI Advantage to existing assets Natural Gas Pipelines Natural gas demand growth = 1.5%/year (a) US is
Slide 12: Approximately $9 Billion in Capital Invested at KMP
Approximately $9 Billion in Capital Invested at KMP ($ millions) $8,000 Total Invested by Type Total Invested by Year $6,000 $1,893 Expansion $2,000 Acquisition $4,000 $1,618 $6,976 $1,600 $1,261 $2,000 $1,232 $1,986 $1,065 $1,020 $0 $1,200 $873 Acquisitions Expansions $800 Total Invested by Segment
Slide 13: 2005 Expansion
2005 Expansion KMP 2005 Expansion Capital Budget 2005 Budget Business Segment ($mm) Major Projects Product Pipelines $185 East Line, Carson Natural Gas Pipelines $130 Dallas, Rancho, Markham, TransColorado CO2 $238 SACROC and Yates Terminals $53 Pasadena, Carteret, Tampaplex Total $606 13
Slide 14: Disciplined Investment Process and Accountability
Illustrative Disciplined Investment Process and Accountability Decision Accountability Acquisition/Expansion Model Segment Budget EBITDA $60 2004 DCF $400 Sustaining Capital (10) Add: Acquisition/Expansion 50 Distributable CF 50 2005 DCF $450 Purchase Price 400 Multiple 8X IRR (a) 17% Board Review 2
Slide 15: Leads to Attractive Return on Capital
Leads to Attractive Return on Capital Return on Investment: 2000 2001 2002 2003 2004 Products Pipelines 11.9% 11.8% 12.8% 12.9% 12.6% Natural Gas Pipelines 13.3 15.5 12.9 13.5 14.0 CO2 27.5 24.6 22.0 21.9 23.8 Terminals 19.1 18.2 17.7 18.4 18.0 KMP Return on Investment (a) 12.3% 12.7% 12.6% 13.1% 13
Slide 16: KMP is Conservatively Capitalized
KMP is Conservatively Capitalized Credit Summary Rating Baa1/BBB+ Current Net Debt / Total Capital (a) 52% Long-Term Debt Maturities 2005 Budget Estimates: $ (in millions) Debt / EBITDA 3.0x EBITDA / Interest 6.3x 2005 $205 2006 $45 2007 $255 CP Capacity (b) 2008 $5 2009 $250 Total Revolver $1,250 O
Slide 17: KMP is Growing Equity Distribution Coverage
KMP is Growing Equity Distribution Coverage Published Budget vs. Actual Coverage Internally Generated Cash Flow 1.10 Budgeted Actual 1.08 Available for Reinvestment ($ mm) 1.06 1.04 1.05 1.02 $250 KMR Distributions 1.00 1.00 $215 1.00 Coverage $200 $194 $150 $136 0.90 2002 2003 2004 2005E $108 $100
Slide 18: Kinder Morgan Inc.
Kinder Morgan Inc.
Slide 19: Solid Asset Base Generates Stable Fee Income
Solid Asset Base Generates Stable Fee Income Investment in KMP (a) KMI NGPL 2005 Segment Income (b) General partner interest earns FERC regulated with 3 year incentive distributions average contract life Owns 17% of total limited Primary customers are Chicago partner units local distribution
Slide 20: KMI is Conservatively Capitalized
KMI is Conservatively Capitalized Credit Summary Rating Baa2/BBB Current Net Debt / Total Capital (a) 39% 2005 Budget Estimates: Long-Term Debt Maturities Debt / EBITDA 2.4x $ (in millions) EBITDA / Interest 7.5x 2005 $505 2006 $5 CP Capacity (b) 2007 $5 Total Revolver $800 2008 $305 Outstanding CP
Slide 21: Targeted KMI Internal Growth
Targeted KMI Internal Growth Three Assumptions: 1. Investment in KMP 15% growth results from 8-10% LP distribution growth 2. NGPL / Other Assets 3 - 5% segment earnings growth 3. Use of Free Cash Flow $104 million in share repurchase Consistent with 10-12% earnings growth 4. Use of Free Cash Flow $2
Slide 22: Limited Reinvestment Required for Growth
Limited Reinvestment Required for Growth (a) 20% S&P 500 Energy Index Change in CF 1998-2003 KMI 15% KMI (2) (b) S&P 500 – All Energy (c) 10% S&P 500 5% S&P 500 Utility Index 0% -10% -5% 0% 5% 10% 15% 20% -5% Change in Assets 1998-2003 -10% Source: Factset (a) Comparison does not include any firms w
Slide 23: Tremendous Historical Incremental Returns
Tremendous Historical Incremental Returns Return on Investment: 2000 2001 2002 2003 2004 Investment in KMP 11.2% 16.9% 21.4% 25.0% 29.6% NGPL 11.4 11.1 10.9 11.4 12.1 Retail 13.0 11.7 15.0 14.5 13.1 Power 14.3 20.2 9.7 5.6 4.7 KMI Return on Investment (a,b) a,b) 10.5% 11.7% 12.4% 13.3% 14.8% KMI Ret
Slide 24: Over $2.7 billion returned to investors 2000-2005
Over $2.7 billion returned to investors 2000-2005 $2,766 $2,800 $565 $2,300 2000-2004 2005E (a) $1,800 $1,149 $1,300 $839 $778 $2,201 $800 $343 $222 $300 $496 $556 -$200 Dividends Share Change in Net Total Repurchase Debt (a) 2005E numbers include $118 million in share repurchase from TransColorado
Slide 25: Risks
Risks Regulatory Pacific Products Pipeline FERC/CPUC case Periodic rate reviews Unexpected FERC policy changes Environmental Terrorism Interest Rates 50% of debt is floating rate Budget assumes approximately 100 bps increase in floating rates over the year A full year of a 100 ba
Slide 26: Summary
Summary Stable Cash Flow Own assets core to energy infrastructure KMP/KMR: Internal Growth Opportunities 6-7% Yield and Critical Mass 8-10% Well-located assets/favorable demographics Long-Term Fixed Cost Business Growth Drop growth to bottom line Unique Structure Tax Efficient KMI:
Slide 27: Kinder Morgan
KINDER’ MORGAN
Kinder Morgan — Lehman 2005 CEO Energy/Power Conference on 6ix